-Tokunboh Ishmael, Co-Founder and Managing Partner, Alitheia Capital
This week, the African Private Equity and Venture Capital Association (AVCA) holds its annual conference in Lagos, Nigeria. Ahead of this event, here is an article I wrote, reflecting on the potential of Nigeria’s capital market.
As one of Africa’s largest economy, Nigeria boasts a GDP of $253 billion and a population exceeding 200 million, more than half of whom are under the age of 25. Yet, the size, structure and impact of its capital market do not reflect this potential. The Nigerian Exchange (NGX) currently has a total market capitalisation of over ₦59 trillion (about $36 billion) — a figure that pales in comparison to the capital formation required to meet the country’s development goals. For context, South Africa’s market capitalisation is more than three times larger, despite its smaller population.
That said, recent market performance suggests a strong appetite for growth. The NGX was Africa’s top-performing exchange in the first half of 2024, with a 35.17% gain over the previous quarter, according to a PwC report. Market capitalisation — even in the face of persistent double-digit inflation — grew by 38.33%, driven by new listings, landmark acquisitions, and a sharp rise in share prices.
Beyond the public markets, Nigeria has one of the largest private capital ecosystems in Africa. Reports from AVCA show that Nigeria consistently ranked among the top 10 destinations for venture capital on the continent over the past five years, both in deal volume and value.
Nigeria’s capital market holds vast, untapped potential. However, unlocking that potential requires more than surface-level reforms; it demands a bold and deliberate shift toward innovation, inclusion, and sustainability. That transformation can be guided by what I call the 3 Ds: Demystify, Digitise, and Diversify, which is a strategic framework for turning a fragmented and underutilised market into a powerful engine for inclusive growth and long-term prosperity.
1. Demystify
Financial literacy remains one of the most persistent barriers to market participation. For many Nigerians — particularly women, young people, and those in underserved communities, who make up the bulk of the population — capital markets are shrouded in jargon, perceived risk, and cultural myths.
To widen the investor base, we must demystify capital markets through targeted financial education and outreach. Financial instruments should not feel like gated tools for the elite or inscrutable financial instruments. They should be accessible pathways to prosperity for all.
Take for instance, gender bonds, which is a subset of gender lens investing. These instruments leverage debt to channel capital into businesses and initiatives that economically empower women and is key to closing gender financing gaps, enabling job creation, and contributing to GDP growth. Yet, uptake remains modest in Nigeria — and, indeed, across the continent. This is just one aspect of finance that requires demystifying.
Going broader, financial literacy starting early and at grassroots is a necessary first step to demystifying capital markets. Yellow Cowries, a platform that I created using gamification to teach financial literacy, is playing a role on this path by creating financial literacy clubs in schools and small business associations across Nigeria alongside an annual financial literacy Brainee competition for students and young adults.
Additionally, at Alitheia, we are intentional about demystifying the role of the various layers of the capital stack in scaling the reach and opportunity of small and growing businesses.
2. Digitise
Technology is a great equaliser. With over 122 million internet users and a median age of 18, Nigeria has the digital foundation to revolutionise how people access and understand capital markets. But the country is still not there.
Today, potential retail investors remain shut out due to geography, access, or sheer lack of awareness. Digital platforms — from mobile investment apps to blockchain-based issuance tools — can lower costs, expand reach, and attract a new generation of investors who are more likely to tap their phones than call a broker.
By leveraging digital platforms, we can democratise access to investment opportunities, making it easier for individuals and institutions to participate. In addition to opening the gates to more investors, digitisation makes the system more transparent, efficient, and accountable.
3. Diversify
Globally, achieving the United Nations Sustainable Development Goals (SDGs) requires over $5 trillion in annual financing. Government budgets and donor contributions alone are insufficient to close this gap. The private sector must play a much greater role.
For Nigeria, this means developing a broader, more flexible toolkit of financial instruments that can channel investment into high-impact sectors like healthcare, education, renewable energy, and gender equity. Sustainability-themed financing — across both equity and debt — offers a compelling path forward, delivering financial returns while also generating measurable social and environmental outcomes.
From my decades-long experience as an investor, I have seen how catalytic capital can transform not just businesses, but entire communities. Yet the reality remains that access to capital — especially for high-impact enterprises operating at the base of the economy — is still scarce. Too many promising entrepreneurs remain starved of the financing they need to grow, scale, and deliver on their potential.
Expanding the flow of capital to include a wider range of instruments — particularly private debt and equity tailored to the needs of small and medium-sized enterprises (SMEs) —is essential.
Indeed, some of the businesses in our portfolio at Alitheia Capital — such as Paga, SKLD, MAX, and Psaltry — have successfully leveraged private debt to scale operations, create jobs, and drive inclusive growth. They are powerful examples of what’s possible when the right type of capital meets the right kind of business. However, these businesses are still the exception, not the rule.
Conclusion
The supply of flexible, impact-aligned capital in Nigeria remains a drop in the ocean compared to what’s needed. To drive inclusive development, we must unlock significantly more private capital from diverse sources to support the SMEs that form the backbone of our economy and the future of sustainable growth. One way to achieve this is through capital markets, which has the potential to broaden domestic participation by allowing local and retail investors to share in the value created by high-growth local and global enterprises. Thus, deepening ownership, liquidity, economic participation, and long-term economic inclusion.
In addition, a well-functioning capital market provides viable exit pathways for private equity and venture investments, enabling fund managers to recycle capital and prove returns and for businesses to grow. By broadening capital markets, we create a more sustainable investment ecosystem — one where value creation, liquidity, and wealth-building go hand in hand.
By Demystifying financial instruments, Digitising access and participation, and Diversifying the types of capital and products available, we can democratise access to capital markets to fuel business and economic growth profitably and purposefully. It is energising to witness the vibrant dialogue around capital markets and inclusive growth and there is a growing recognition — among regulators, investors, and entrepreneurs alike — that Nigeria’s capital markets can be a force for inclusive prosperity. Indeed, the recent decision by the NGX to launch Impact Board to encourage sustainable instruments is a good example of such thinking. Furthermore, the AVCA has been instrumental in convening platforms to raise awareness of the role of African private capital in sustainable finance. I look forward to such discussions at the upcoming AVCA conference in Lagos, next week. Nonetheless, there is still much work to do, and all hands must be on deck to develop a capital market fit for purpose to enable the desired sustainable growth and